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TRANSCRIPT
The legendRMI SAMBRA: custodian Atlantis, Plato’s infamous myth, has captivated audiences for more than 2,300 years.The founders of Atlantis were half god and half human. The legend of Atlantis is a story about a moral, spiritual people who lived in a highly advanced, utopian civilization. But they became greedy, petty and “morally bankrupt”, and the gods “became angry because the people had lost their way and turned to immoral pursuits”.As punishment the gods sent “one terrible night of fire and earthquakes” that caused Atlantis to sink into the sea never to be found again.
The Motor Body Repair Landscape
RMI SAMBRA: custodian of industry standards & sustainability.
Represents over a 1 000 motor body repairers.
Responsible for repairing over 80% of all insured repair claims.
Interfaces with all key players in the formal MBR sector incl: Short term motor insurers Insurer intermediaries OEM approval programmes OEM and alternative part suppliers Paint and equipment suppliers and MBRs servicing that
market
The Motor Body Repair Landscape
Significant changes in the MBR sector
Not business as usual
Growth forecast in the SA job market (first quarter of 2020) 5-year low (ManpowerGroup SA’s latest employment outlook)
The Motor Body Repair Landscape
Small businesses:
Struggling to stay afloat Most probable sector to take on unskilled labour Concerns about the challenges facing the MBR
sector Something has got to give. Something must be done about the issues
eroding our industry
Insufficient training & access to information
Lack of profitability = slow / no upskilling Creates heightened sensitivity Training interventions cost money & remove productive staff from
the business They are subsequently rejected, even if required to keep pace
with developments – not ideal
Continuing technological transformation Significant impact on the automotive industry,
specifically the MBR sector Mismatch between labour available &
skills required
The cost of compliance
Compliance costs = huge impact on commercial sustainability
RMI-initiated research (IQ business) Initial results: 23% of the SAMBRA business
respondents have, at some point, considered closing their business because of compliance costs
12
13%
14%
19%
16%
41%
54%
27%
16%
TOTAL
SAMBRA
Relevance of statutory regulation within my industry
Largely irrelevant Somewhat irrelevant
Somewhat relevant Very relevant
15%
12%
21%
18%
39%
46%
25%
24%
TOTAL
SAMBRA
Relevance of statutory regulation given South Africa’s socio-economic context
Largely irrelevant Somewhat irrelevant
Somewhat relevant Very relevant
SAMBRA n=50
Total Sample n=335
Only 16% of SAMBRA business representatives believe that the statutory regulation pertaining to their industry is very relevant, compared to 27% across all the RMI associations. Do we need to revisit statutory regulation in the industry?
Encouragingly, a large proportion (70%) of SAMBRA
business owners believe that the regulation that pertains
makes sense given the country’s socio-economic context.
13
23% 23%
77% 77%
SAMBRA TOTAL
Considered closing business because of complaian costs
Yes No
10%
8%
33%
30%
37%
34%
20%
28%
TOTAL
SAMBRA
Worried about the impact of compliance costs on the commercial sustainability of the busines
Never Sometimes Often Very often
Compared to the total sample, a slightly higher proportion of SAMBRA business owners find themselves worried about the cost of compliance on commercial sustainability. However, at 23%, the proportion of business owners that have considered closing their business because of compliance costs is in line with the total RMI sample.
SAMBRA n=50
Total Sample n=335
The cost of compliance
Many SAMBRA business owners believe that they could be more compliant with: Equipment-related matters & Environment/waste management matters
HOWEVER
Budget and skills are the key barriers to improved compliance
Business efficiency
MBRs (smaller businesses) Process flow and operational efficiency
improvements Profit from efficiencies lacking
RMI / SAMBRA focus to add value in 2020
Cash flow challenges
Pay Before Release (PBR) has become necessary
Protects the MBR sector and its cash flow from: Delayed insurer payment / poor payment
administration (especially in the intermediary space of the insurance industry)
MBR sector – the only sector not to have exercised its right of lien over vehicles we have repaired
Insurer interface
Greatest challenges to the MBR industry:
Dominant insurer practices directly impacting on the fiscal dispensation in the industry
Independent research: staggering differences between labour rates paid between MBR and OEM-appointed motor dealerso MBR average labour rate = R278/h o OEM appointed dealers = approx. R840/h
(at least 3 times higher)
Time to level the playing field
Difficult to rationalise the large labour rate differential Both MBRs & OEM-appointed dealers are in the same
industry Both are highly complex (repairing high-tech vehicles) Both require substantive investments into their
service/repair departments Both are dealing with quality and professional repairs
(mechanical, body and accident repairs) for increasingly demanding customers
Why is the MBR sector treated differently?
Situation not sustainable
MBR industry can no longer afford To pay artisans a wage that encourages entry into the
sector To upskill their current workforce to adequately prepare
them for new technologies
Insurers and OEMs expect: Excellent repair quality 95% plus CSI ratings
Not achievable in an environment which is unprofitable
In additionInsurers seek to purchase parts directly from OEMs / their appointed dealers
Impact: The part price mark-up Potential settlement discounts previously enjoyed
SLAs are one-sided and fiscally uneconomic.
Panels are controlled (directly or via 3rd party service providers)
The use of ALT parts results in revenue falling
Low % write-off values results in work volume reduction
OEM interface
Adherence to OEM approval programmes
Continued demands on costly capital investment and training
Open vs. restricted OEM programmes
A future reimagined
Everyone is facing their own challenges. The success of one can never be at the detriment of the other. We need to accept change is inevitable
Fair, unrestricted and competitive MBR business environment will:
o Grow small businesses o Stimulate employment
RMI strongly rejects any bias, no matter what form it takes
RMI robustly opposes any form of unfair business practices
A future reimagined
Conservative Business growth in the large MBR business sector
Real growth lies in the small MBR business sector
As an industry we are committed to working tirelessly with all our business partners to ensure a sustainable trading environment
A future view
We anticipate: A decline in intermediary participants in the short term
insurance sector An increase in direct motor insurance
We predict: OEM approval programmes to remain an integral part of
the industry. The form however may change dramatically Open OEM approval programmes for all qualifying
repairers without dropping standards
A future view
OEMs
If OEMs wish to maintain the current part supply levels, they will need to seek more effective and production efficient mechanisms
The cost of premium vehicle parts is currently not sustainable and alternative parts manufacturers have already made significant inroads into the genuine parts market
A future view
Additional impact – the increase in effective repair technology which allows MBRs to repair panels that were previously replaced
MBRs’ right of lien will, in our view, negate insurers’ parts purchase / payment strategy
Paint and equipment suppliers Increased local production is a necessity OEMs need to encourage competition in The sector by approving a wider range of
paints for application to their vehicles
On the issue of costs
MBRs need: Higher SLA labour rates Labour rate increases 3 months prior to annual SLA
renewals Timeous payment to small businesses Write-off values to return to more reasonable levels (75%)
thereby returning more work into MBR facilities Reduced regulatory and other compliance costs Completely independent management of the Audatex
system
We are not finished yet
Insurers need to: Honour client choice of MBR service provider Accept B-BBEE regulatory framework
Cost effective online training module development that allows in-house or own time training on critical business and technical issues
A more regulated towing and recovery sector which champions small business
The chance to build a different future
The MBR industry will need to: Regroup Regain sector independence Focus on production efficiencies Develop appropriate skills Make use of best available repair technology Improve profit margins
We owe our customers the best possible level of repair quality and serviceWe owe ourselves the correct levels of ROI
The chance to build a different future
Foster value chain relationships and collaboration
We cannot do it alone – we need your help and support
We need to start pushing harder and faster together
The chance to build a different future
“It always seems impossible until it is done.”
Nelson Mandela